15
APRIL 2014
ACT
BUSINESSNEWS
AUTHOR:
CHRISSLEIGHT
is
one of theworld’smost
internationally renowned
construction businesswriters,
with specialist expertise in
financial markets and stock
market analysis. He is editor
of KHL’smarket-leading
International Construction
and
is a regular contributor to
ACT’
s sister publication,
International Cranes
and Specialized
Transport
.
After the wobble
linked to the end
of QE, the stock
markets have
rediscovered their
confidence.
Chris
Sleight
reports.
T
he first fewweeks
of 2014were a little
uncertain for the
stockmarkets, as thehuge
rallyof 2013was punctured
by thenews that theFed
wouldbephasingout its
quantitative easing (QE)
policy this year. But February
and earlyMarchhave seen
investors getting into a buying
mindset again, with the tech-
heavyNASDAQ Indexdoing
particularlywell.
The announcement of
the taperingofQEhad
an immediate impact on
U.S. equities, albeit in a
roundaboutway. It droveup
yields on low risk investments
at home, whichmade them
more attractive to investors
that hadpreviouslyput their
money in riskier emerging
markets.
Themigrationof funds
back toU.S. shores drove
downmanydeveloping
world currencies, forcing
their central banks tohike
interest rates.While this
proppedup their currencies,
higher interest rates are of
course bad for business and
economic growth as they are a
disincentive to invest.
Itwas these effects that
took themarkets down in
January andFebruary, but
since then investors seem
tohavedecided theworld is
not such ableakplace after
all. TheDowhas returned to
close to the recordhighs seen
a fewmonths ago, and the
NASDAQ is threatening to
over-top its all-timehigh, set
at theheight of the “dot.com”
boom in late 1999.
Consequences
One of the interesting things
about this latest rally is that
this time theheavy equipment
sector has joined the party. As
our graph illustrates, the
ACT
HEI has tracked the growth
in theDow fairly closely since
October (the sharp jump
in the
ACT
HEI, triggered
by the formationofCNH
Industrial fromCNH andFiat
Industrial). From that point
to thepresent day, the
ACT
HEI andDowhave grownby
a similar percentage.
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P500
40%
35%
30%
25%
20%
15%
10%
5%
0%
5%
-10%
% change
52weeks toMarch 2014
This augerswell for the
general industryoutlook.
As regular readers of this
columnwill know, the rally
of 2013was not necessarily
about economic growth, but
the fact that indexes like the
Dowwere one of the few safe
havens available at the time.
This iswhy themainstream
indicators rocketed last year,
while smaller individual
stocks – such as those that
makeup the
ACT
HEI – stood
still in the face ofweak global
growth.
The fact that the
ACT
HEI
and the blue-chip indices are
nowmoving together seems
to indicate that there is solid
economic growth (or at least
optimism about the economy)
behind the latest rally.
It is certainly the case that
construction industrypundits
expect 2014 tobe a good year
for the sector. Residential
construction is expected to
keepon climbing, and the
non-residential sector is
expected to finally return to
growth after a long anddeep
recession.
■
ACT’
s Heavy Equipment Index
(HEI) tracks the performance
of eight of America’smost
significant, publicly-traded
construction equipment
manufacturers – Astec
Industries, Caterpillar, CNH,
Deere & Company, Joy Global,
Manitowoc and Terex.
Real world rally
